Updated: 11 January 2022
If the pandemic has taught us anything, it’s that unexpected situations can creep up on us. Whether it’s supply chain disruption, staff shortages or an influx of demand, your business has to be ready to adapt at a moment’s notice. That’s where contingency plans come in — by looking at your key risks, you can minimise their impact and speed up recovery. Here, we look at what a contingency plan is and how to prepare one to help tackle whatever comes your way.
A contingency plan is a document that outlines how your business should operate in the event of a disruption or disaster. This can include things like fire or flood, supply chain disruption, cyber attacks, legal threats, or even lockdowns, but can also include late client payments or what happens if key employees are seriously ill or resign.
Start by assessing the potential risks your business faces. Make a note of how likely each is to help you prioritise. You’ll want to consider a wide range, including both external and internal risks. Some examples could include:
Once that’s done, you’ll want to consider how these risks could impact key areas of your business and note the potential impact next to the corresponding risk. These could include:
You’ll then want to set yourself a timescale for each to find a resolution. Not all of these will be straightforward to manage, so allow yourself plenty of time to sit down with key staff to brainstorm how best to tackle these.
Not all the risks you’ve identified will be created equal, so start by focusing on finding solutions to those that’ll affect your most essential operations. This ensures you can mitigate their impact and minimise any downtime associated with them.
For instance, if your business imports materials from overseas to create your products, and increased demand leads to a shortage in those materials, that’s not only going to slow down production, but also delivery to your clients. To mitigate this, you can find backup suppliers within the UK, and commit to regular stock takes to keep an eye on your inventory.
There’ll always be unexpected complications that arise when you put these solutions into practice, but having a process in place makes it more likely that your business will be able to recover quickly.
Some of the risks you’ve identified could be managed with the right type of insurance in place, so make sure your policies cover these.
For example, buildings insurance will typically cover you for damage to your business premises, such as that caused by a fire or flood. You could also take out business interruption insurance to cover for loss of income if you have to stop trading for a period of time — although it’s worth checking what your policy specifically covers against, as most won’t cover closures caused by the pandemic, for instance.
Next, you’ll want to consider your key staff and any additional responsibilities they may be required to undertake in order to minimise impact of any disruption. Record their contact details, as well as their role, and said additional responsibilities. You’ll want to keep this documented digitally so it can be accessed from anywhere if you need to put your plan into practice.
You should also look to record contact details of all of your staff, your customers, your bank, your insurers and your suppliers, as well as key contacts such as utility companies. This ensures that whoever is responsible for managing a particular mitigation has everything they need accessible.
Depending on the scale of the disruption or emergency, you may find it useful to prepare your communications for specific risks ahead of time. It could just include who needs to be informed, whether that’s your customers or partners, or it may be helpful to draft press releases, emails and social media posts in addition. This could help save you time and allow you to react more quickly.
If you do draft communications in advance, make sure to focus on nailing the tone. You’ll want to be clear but also show empathy in order to maintain good relationships with your customers.
There’s no use in a contingency plan if you haven’t tested it before you need to use it. Take some time to test each stage, provide the adequate training to any staff that need it, and adapt it if need be. Gathering feedback from your staff can help you improve your plans and finesse out any areas that aren’t clear.
In addition, you’ll want to regularly revisit your plans and update them as your business continues to grow and evolve. Add any new risks that arise and account for any changes in legislation that may impact your plans.
While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.